Cabinet takes hard look at levy plan

The federal government is working on proposals for a flood levy to be introduced in the first week of Parliament in two weeks’ time, but which would exempt low-income earners.

As the government reshapes its budget priorities to pay for the disaster, Treasurer
Wayne Swan
warned that the economic impact of the flood would be “enormous", because of the size of the Queensland economy.

“The state now contributes around 19 per cent to our national output, up from 14 per cent in 1974, and although the full impact won’t be known for some time, obviously the hit to our economy will be much larger than 1974 and much larger than other ­natural disasters in our memory," Mr Swan said.

Cabinet’s budget committee has been meeting to make tough decisions on the amount required to finance the flood relief and ­reconstruction, while bringing the budget back into surplus in 2012-13.

Mr Swan confirmed in the Treasurer’s economic note yesterday that “difficult spending cuts" would be made in the budget and that the government was working through all options, including a temporary levy.

But the opposition has signalled a battle in Parliament over such a move, vowing to vote against it.

Victorian Premier
Ted Baillieu
has left open support for such a levy, although his deputy,
Peter Ryan,
said he had “severe misgivings" about it.

“I don’t think they should make the first port of call the pockets of Australian families and businesses,’’ Mr Ryan said last week.

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Mr Baillieu said he would not speculate on the Gillard government’s proposed flood levy or federal Opposition Leader
Tony Abbott
’s rejection of it until a solid proposal was on the table.

“This is a matter for the Commonwealth; this is a natural disaster of unprecedented proportion, the cost of which we don’t yet have a handle on nationally and certainly we don’t have a handle on in Victoria," he said.

“It is a matter for the federal government to respond on their budget terms. We will deal with the Victorian budget response."

The proposed levy is still be to discussed by the full federal cabinet, but it is understood that the government will recommend that low-income earners be excluded.

A key issue under consideration by the federal government is the need for a new co-ordinated and cost-sharing approach to planning the reconstruction effort, involving federal, state and local government as well as the private sector.

Mr Swan will be seeking help today from business as he chairs the private sector taskforce set up to advise the government on the flood.

Senior government sources said it was essential that critical infrastructure and housing was not simply rebuilt but that flood-proofing was also considered to minimise the chances of further crippling damage from extreme weather events.

The federal government is still assessing the full cost of the flood reconstruction and relief, and Mr Swan will outline the latest estimates of the damages bill on Friday.

A report by the Australian Bureau of Agricultural and Resource Economics and Sciences late last week found that the cost in lost agricultural production and coal exports would be at least $3.1 billion.

ABARES deputy executive director Paul Morris said the cost of ­damaged infrastructure was likely to be far higher than the impact on ­production.

Mr Abbott has called for the government to scrap the national broadband network funding to pay for flood damage.

But government sources said that if the reconstruction was planned properly, there could be cost efficiencies, such as laying NBN cable at the same time as roads and other transport infrastructure were being rebuilt.

The federal government has also warned against trying to cheat the flood assistance scheme and has set up a new taskforce to scrutinise ­suspect claims and crack down on rorts.

More than $225,000 million has already been paid to more than 250 flood victims.

Human Services Minister
Tanya Plibersek
said the taskforce of 11 ­Centrelink officers had not detected fraud yet but that a number of claims were being investigated.

The federal government is now ­paying assistance to flood victims in Queensland, NSW, Victoria and ­Tasmania.